Summary of Oversight and Regulatory Activities

September 2018 DIRECTION PRINCIPALE DU FINANCEMENT DES SOCIÉTÉS

THE DIRECTION PRINCIPALE DU FINANCEMENT DES SOCIÉTÉS (“CORPORATE FINANCE”) IS RESPONSIBLE FOR ENSURING THAT INVESTORS ARE PROTECTED AND MARKETS OPERATE EFFICIENTLY. Profile 2 OVERSIGHT of compliance DEVELOPMENT and Fostering with continuous disclosure, IMPLEMENTATION of guidance 7 securities distribution, and regulations related to securities awareness take-over bid, and insider distributions, mergers and acquisitions, reporting requirements. and ongoing requirements for reporting Informing 18 issuers in Québec (the “companies”) and insiders. Innovating 40

Message from the Senior Director, Corporate Finance The 2017–2020 Strategic Plan of the Autorité des marchés financiers (the “AMF” or the “Authority”) sets out orientations demonstrating our leadership, the value we add, and our capacity for innovation within the scope of our mission as Québec’s financial sector regulator. I am therefore proud to provide you with an overview of Corporate Finance’s principal accomplishments for the year 2017-2018.

The section FOSTERING AWARENESS presents a sampling of the main deficiencies identified this past year in MD&As, mining technical reports, insider reports, and prospectuses and related offering documents. I encourage you to read this section carefully as we may ask for corrections or delay the issuance of a prospectus receipt if we consider disclosure to be incomplete or incorrect.

The section INFORMING contains some interesting information, including a list of the issue-oriented reviews in progress and those planned for 2018-2019, the report on our first year overseeing enterprises subject to An Act respecting transparency measures in the mining, oil and gas industries, and a new item devoted to our regulatory work in socially responsible investing.

1 We were also very active with respect to financial technology (“fintech”) businesses. The AMF is co-lead of the Canadian Securities Administrators (“CSA”) Regulatory Sandbox, established in 2017. During 2017-2018, this committee 2 considered approximately twenty applications, most of them from companies wishing to raise start-up capital by issuing cryptocurrencies or tokens. The work currently underway will enable us to develop our expertise and understanding of the 3 issues and technologies behind these new business models.

The regulatory part of the section INFORMING discusses a major focus of our regulatory activities last year: the drafting of proposed National Instrument 52-112 – Non-GAAP and Other Financial Measures Disclosure. The AMF is co-lead on this 1 initiative, reflecting the importance we place on the quality and consistency of financial information available in the markets. 2 The public consultation on reducing the regulatory burden, announced in our 2016-2017 summary, resulted in the creation of six regulatory projects. The AMF will be lead or co-lead on five of them. The purpose of all these projects is to facilitate access 3 to public markets, which provide companies with transparency and visibility. We are therefore exploring avenues more in line with the new realities imposed by the speed at which financial information is transmitted and absorbed on the world’s stock 4 markets, changing investor communication habits, and the heightened presence of private sources of financing. 5 Lastly, we changed the composition of the Corporate Finance Advisory Committee to include institutional investor, reporting issuer and brokerage firm representatives, as well as securities lawyers. In addition to this committee, the AMF also has a Financial Advisory Committee and a Mining Advisory Committee. These key forums for discussion and exchange are important to us, and I sincerely thank the members of all of them for their contribution: because of your invaluable input, we are better able to carry out our role as a local regulator. 1 2

Lucie J. Roy 3 Senior Director, Corporate Finance 4

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NOTE : For the sake of concision, the full names of the regulations (including the forms), policy statements and notices are listed in Appendix A. Autorité des marchés financiers 1 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

Table of Contents We begin with a PROFILE of companies and securities trading in Québec and then, under the themes FOSTERING AWARENESS, INFORMING and INNOVATING, discuss securities regulatory issues pertaining to companies and insiders.

PROFILE 2

1 Companies 2

2 Overview of distributions by Québec companies 3

3 Findings of continuous disclosure reviews 6

FOSTERING AWARENESS 7

1 Management’s discussion and analysis 8

2 Certification of disclosure in issuers’ annual and interim filings 10

3 Insider reports 12

4 Disclosure for mineral projects 13

5 Certain requirements for distributions 15

INFORMING 18

1 AMF issue-oriented reviews 18

2 An Act respecting transparency measures in the mining, oil and gas industries: Initial report 20

3 Growing interest in socially responsible investing 22

4 Booming industry sectors 25

5 More reminders 27

6 Recapitalization of federally chartered banks (bail-in) and ramifications for Québec 30

7 Regulatory initiatives 31

8 The AMF on the international stage 37

INNOVATING 40

1 Artificial intelligence initiatives for disclosure monitoring 40

2 Fintechs – The work of the regulatory sandbox 41

3 Monitoring via social media 42

APPENDIX A 43

Legal deposit – Bibliothèque et Archives nationales du Québec, 2018 ISSN 2561-200X (On-line) This document is published on the website of the Autorité des marchés financiers at:https://lautorite.qc.ca/en/general-public/. Autorité des marchés financiers 2 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES PROFILE We encourage you to read this section, which provides a snapshot of companies and securities trading in Québec.

1 Companies

Some figures

2,026 companies – reporting issuers in Québec

2 034 sociétés – émetteurs assujettis au Québec 1 724 companies for which the AMF is the principal regulator 7511 sociétés dont le Québec est l’autorité principale 58%59 % : émetteursventure émergentsissuers 42% 41 % : autres: other émetteurs issuers

1 Including 183 companies subject to a cease trade order and 257 Desjardins caisses (credit unions). Autorité des marchés financiers 3 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

Overview of distributions 2 by Québec companies2

Québec companies draw on a variety of financing sources to fund their operations. This section presents the amounts raised by Québec companies on the public market and exempt market.

Profile of Québec companies listed on the Toronto Stock Exchange and the TSX Venture Exchange The following graph shows the changes in the market capitalization of Québec companies listed either on the Toronto Stock Exchange (“TSX”) or the TSX Venture Exchange (“TSXV”).3 It also shows the changes from 2008 to 2017 in such market capitalization as a percentage of the total capitalization of all Canadian companies.

In 2016, market capitalization was $390 billion and represented 16% of Canadian market capitalization. In 2017, as in 2016, the market capitalization of Québec companies increased to $438 billion, but still accounted for 16% of the total market capitalization of companies in Canada. Moreover, this percentage continued to be smaller than Québec’s share of Canada’s gross domestic product (“GDP”) in 2017, which stood at 19%.4

Market Capitalization of Québec Companies (in billions of dollars)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 TS TSV A C

Sources: TMX Group and the AMF Sources: TMX Group and the AMF

2 Companies that have their head office in Québec. 3 The market capitalization of companies listed on other stock exchanges is not included. 4 Source: Statistics Canada. Autorité des marchés financiers 4 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

2 Overview of distributions by Québec companies (continued)

When the Morningstar National Bank Québec Index is Companies began to seek financing again on the stock compared with the S&P/TSX Composite Index, Québec markets. Globally, 2017 saw more initial public offerings companies outperformed Canadian companies as a (“IPOs”) than the past ten years. In 2017, there were 28 IPOs whole over the past few years. Like the Québec economy, in Canada on the TSX and TSXV, for a total of $6.1 billion— the sectoral distribution of Québec companies is more a significant improvement over 2016. 5 However, the trend diversified that than for Canadian companies as a whole. reversal did not happen in Québec. In 2017, for a second The Québec index’s improved performance in recent consecutive year, there were no Québec IPOs on the TSX years is partly explained by the small number of energy or TSXV. companies in the index. As shown in the graph below, the number of Québec The strong global trend that had been emerging over companies listed on the TSX and TSXV decreased slightly the previous several years of fewer and fewer businesses over the past year, from 195 to 189, in keeping with the turning to the stock markets for their capital needs downward trend of the past ten years. appeared to reverse direction in 2017.

Number of Québec companies by industry sector

22000808 22000909 22001010 22001111 22001212 22001313 22001414 22001515 22001616 22001717

CommunicationsCommunications and and media media DiversifiedDiversified industries industries LifeLife sciences sciences MiningMining TechnologyTechnology OtherOther

Sources:Sources: TMX TMX Group Group and and the the AMF AMF

Distributions by Québec companies on the public market and exempt market In 2017, Québec companies raised $3.0 billion on the public In 2017, 376 prospectuses were filed in Canada, markets. This represents a slight decrease from $3.2 billion, including 161 in all Canadian provinces (43%) and 104 in all which was both the amount raised in 2016 and the average Canadian provinces excluding Québec (28%). The other for the last three years. 111 prospectuses were filed in only a few Canadian provinces (29%), including, in some cases, Québec.

5 Source: TMX Group.

22001414 22001515 22001616

MM MM

SouSourcrecse s: G: Grouproupe eT MTMXX e te tl' Al'Autuotroitérité

Autorité des marchés financiers 5 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

2 Overview of distributions by Québec companies (continued) 2 Overview of distributions by Québec companies (continued)

When the Morningstar National Bank Québec Index is In addition to raising capital on the public markets, Québec investor exemption (section 2.3); the family, friends and compared with the S&P/TSX Composite Index, Québec companies raised $10.3 billion on the exempt market in business associates exemption (section 2.5); the offering companies outperformed Canadian companies as a 2017. 6 They therefore raised a total of $13.3 billion, down memorandum exemption (section 2.9); and the minimum whole over the past few years. Like the Québec economy, from $16.3 billion in 2016. amount investment exemption ($150,000) (section 2.10). the sectoral distribution of Québec companies is more Distributions made under other exemptions accounted diversified that than for Canadian companies as a whole. The following table shows a breakdown of exempt-market for less than 5% of total distributions in 2017. The Québec index’s improved performance in recent data for distributions made by Québec companies under years is partly explained by the small number of energy the four most frequently used prospectus exemptions companies in the index. provided under Regulation 45-106: the accredited The strong global trend that had been emerging over the previous several years of fewer and fewer businesses turning to the stock markets for their capital needs Exempt market distribution amounts: 2015, 2016 and 2017 appeared to reverse direction in 2017. (in thousands of dollars)7

ACCREDITED FAMILY, FRIENDS OFFERING MINIMUM AMOUNT INVESTOR AND BUSINESS MEMORANDUM INVESTMENT (S. 2.3) ASSOCIATES (S. 2.9) (S. 2.10) (S. 2.5)

TOTAL DES PLACEMENTS

Reporting issuers $6,982,510 $10,515 $887 $116,430

Non-reporting issuers $3,892,063 $400 $4,664 $210,481 2015 2015 total $10,874,574 $10,916 $5,551 $326,912

% of all exempt 96.49% 0.10% 0.05% 2.90% distributions

Reporting issuers $7,678,211 $2,777 $517 $1,240,686

Non-reporting issuers $2,036,182 $13,292 $14,243 $2,039,875 2016 2016 total $9,714,393 $16,069 $14,760 $3,280,562

% of all exempt 74% 8 0.12% 0.11% 25% distributions

Reporting issuers $4,729,522 $4,796 $5 $799,787

Non-reporting issuers $2,084,120 $2,876 $28,306 $2,151,793 2017 2017 total $6,813,642 $7,672 $28,311 $2,951,581

% of all exempt 66%9 0.07% 0.27% 29% distributions

6 This figure reflects the amounts raised under prospectus exemptions reported in the reports of exempt distribution filed under section 6.1 of Regulation 45-106. It therefore excludes a very large number of distributions made under exemptions that do not require the filing of such a report. 7 Following our last summary, we adjusted certain figures for 2015 and 2016 owing to the receipt of reports that were filed late. These adjustments are not significant. 8 In 2016, two issuers filed a total of four reports of exempt distribution for major distributions made under the minimum amount investment exemption. All told, these distributions represented more than $3.2 million. If we exclude these distributions because they were unusual, 99% of all distributions in 2016 were made by issuers under the accredited investor exemption. 9 In 2017, one issuer filed two reports of exempt distribution for major distributions made under the minimum amount investment exemption. All told, these distributions represented more than $2.15 million. Excluding these distributions, 83% of all distributions in 2017 were made by issuers under the accredited investor 5 Source: TMX Group. exemption. Autorité des marchés financiers 6 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

Findings of continuous 3 disclosure reviews

The findings of full reviews and issue-oriented reviews conducted under the Harmonized Continuous Disclosure Review Program (“CDR Program”) are divided into five categories.10 A review can have more than one finding. For example, we may ask a company to refile certain documents and make prospective changes to others. The following are the findings for the fiscal year ended March 31, 2018.

Findings of CDR Program reviews

EL ELIn 73% of all cases, we asked the company to take 26% 26% specific measures to improve or modify its continuous R Rdisclosure or applied enforcement measures.

46% 46% In 12% of all cases, our findings related to a study 1% 1% conducted by us on climate change-related disclosure.11 I I 15% 15% In 15% of all cases, no action was required. N N 12% 12%

28 % 28 % 27 % 27 % 26 % 26 %

19 % 19 % 0 1 2 3 ou plus0 1 2 3 ou plus

N N

10 For a description of the categories, see CSA Staff Notice 51-355. 11 For more information, see under the subheading “Climate change.” Autorité des marchés financiers 7 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

FOSTERING AWARENESS We encourage you to read this section carefully to learn about deficiencies observed in the context of our oversight activities and for examples of corrected disclosures that are required and specific steps that may be taken by the AMF. You will also find useful reminders and tips to help you to file documents that comply with securities laws.

BE CAREFUL: Companies that fail to comply with requirements under securities laws may be subject to the following measures: THE REGULATOR HAS TEETH! ●● correction and refiling of the documents involved; ●● changes to subsequent filings; ! ●● publication of the company’s name on a public list of defaulting companies; ●● cease trade orders; ●● refusal to issue a receipt for prospectus financings; and/or ●● administrative or penal sanctions. Autorité des marchés financiers 8 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

1 Management’s discussion and analysis

Finding In the discussion of their operations in their MD&As, some companies simply reproduce the figures already presented in their financial statements without providing any analysis of material changes in revenue or gross profit. Similarly, in the discussion of their liquidity, some companies simply reproduce the figures already presented in their financial statements without providing any analysis of their short-term and long-term liquidity requirements.

The following are examples of corrected disclosures required by us:

NON-COMPLIANT DISCLOSURE CORRECTED DISCLOSURE Discussion of operations Discussion of operations Revenue decreased by 14%, from $25 million to Revenue decreased by $3.5 million (14%), from $21.5 million. $25 million to $21.5 million. Three factors contributed to this decrease:

●● a decline in the unit price of product A (-$5 million); ●● an increase in the volume of sales of product A (+$1 million); and ●● the introduction of new product B in the fourth quarter (+$0.5 million). During the third quarter, in anticipation of the entry of new competitors into our market, we reduced the price of our inventory of product A in order to stimulate sales and concentrated on its replacement product, product B. The lower selling price resulted in sales of an additional 1,200 units of product A compared with the previous fiscal year, but also contributed to a decrease of approximately $2 million in gross profit [...]. Autorité des marchés financiers 9 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

1 Management’s discussion and analysis (continued)

Second example of an MD&A

NON-COMPLIANT DISCLOSURE CORRECTED DISCLOSURE Liquidity Liquidity At year-end, the company had liquid assets totalling At year-end, there was a working capital shortfall $1 million and accounts receivable totalling $15 million. of $2 million. Since then, the company has taken Current assets amounted to $25 million and current a series of steps, including: liabilities amounted to $27 million. ●● carrying out a $3 million private placement; and The company believes that it has sufficient funds to ●● renegotiating an additional $2 million in bank meet its working capital requirements over the next indebtedness. 12 months. In order to complete project ABC, the company estimates that it will need an additional $10 million over the next two years. Cash flow from operating activities and the recent initiatives should sustain part of this project. The company will also have to carry out other distributions or exercise options and subscription rights [...].

How to comply with the requirements in Items 1.4 (Discussion of operations) and 1.6 (Liquidity) of Form 51-102F1 The MD&A must provide an analysis of the company’s operations outlining the company’s results, including material changes in revenue and gross profit. It must also provide an analysis of the company’s liquidity outlining the company’s ability to generate sufficient amounts of cash and cash equivalents, in the short term and the long term, to maintain its capacity to meet planned growth or to fund development activities. Autorité des marchés financiers 10 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

Certification of disclosure in 2 issuers’ annual and interim filings

First finding Companies sometimes fail to include the following in their annual MD&As:

●● conclusions about the effectiveness of internal control over financial reporting (“ICFR”) at the financial year-end; and ●● any material ICFR weakness relating to design; despite the certifying officers having stated in the annual certification that disclosure relating to these items was presented in the MD&A.

The following is an example of corrected disclosure required by us:

NON-COMPLIANT DISCLOSURE CORRECTED DISCLOSURE MD&A MD&A No conclusion or material weakness presented. Management concluded that the company’s ICFR is ineffective and contains the following material weakness:

Although the certification of annual filings states: ●● inadequate segregation of duties.

5.2. Material weakness relating to design: In its annual Given the company’s current size, management and the MD&A, the issuer presented the following information board of directors concluded that the company does regarding each material weakness relating to operation not have the required resources to hire additional staff existing at the financial year end: to remediate the material weakness [...]. (a) a description of the material weakness; (b) the impact of the material weakness on the issuer’s financial reporting and its ICFR; and (c) the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness.

How to comply with the requirements in Regulation 52-109 The certifying officers must ensure that the annual MD&A presents the information certified by them and that disclosure in the certification of annual filings and in the annual MD&A is compliant and consistent. Autorité des marchés financiers 11 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

2 Certification of disclosure in issuers’ annual and interim filings(continued)

Second finding Companies sometimes provide incomplete conclusions regarding the effectiveness of ICFR at the financial year-end, despite the certifying officers having stated in the annual certification that the conclusions regarding the effectiveness of the ICFR were presented in the company’s annual MD&A.

The following is an example of corrected disclosure required by us:

NON-COMPLIANT DISCLOSURE CORRECTED DISCLOSURE MD&A MD&A

Management concluded that the design of ICFR was Management concluded that the design and operation effective. of ICFR were effective.

Although the certification of annual filings states:

6. (b). Evaluation: The issuer’s other certifying offi- cer(s) and I have evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s ICFR at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation.

How to comply with the requirements in Regulation 52-109 Certifying officers must make sure that they have evaluated not only the design, but also the operation of ICFR. They must also ensure that the company’s annual MD&A presents their conclusions in this respect. Autorité des marchés financiers 12 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

3 Insider reports

Finding We noted that reporting insiders still all too often fail to report, or are late in reporting, their trades in securities of a reporting issuer.

Reminder about requirements Under Regulation 55-104, every reporting insider of a reporting issuer must file on SEDI12 an insider report within five days13 of a change:

●● in the beneficial ownership of, or control or direction over, whether direct or indirect, securities of the reporting issuer; ●● in any interest in, or right or obligation associated with, a related financial instrument involving a security of the reporting issuer.

Tips to help you meet deadlines ●● The five-day period is counted in calendar days, not in business days. ●● Don’t forget to also report securities attributed to you under the reporting issuer’s compensation plans (such as stock options or other such securities). ●● Ask your broker to send you trade execution details in a timely manner. It is your responsibility to file your insider reports within five days of the trade.

BE CAREFUL! Any reporting insider who fails to file a report is liable to an administrative monetary penalty of$100 for each day during which each such failure to report occurs, to a maximum amount of $5,000.

Have you received a notice of administrative monetary penalty? You have 15 days within which to send the AMF your observations. However, the fact that you are unaware of your obligations, that you have delegated your reporting obligation to a third party, or that the securities purchased or sold are of minimal value will not alone be considered sufficient reason for us not to impose an administrative monetary penalty.

12 System for Electronic Disclosure by Insiders, SEDI, https://www.sedi.ca/sedi/. 13 Reporting insiders are required to file an initial insider report within 10 days of becoming a reporting insider. Autorité des marchés financiers 13 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

4 Disclosure for mineral projects

ECONOMIC ANALYSIS OF A MINERAL PROJECT

The purpose of an economic analysis is to determine the viability of a mineral project. Given the importance of this step in the development of a mineral project, the results of an economic analysis constitute material information under securities laws.

Finding We noted that some economic analyses are based on unrealistic mineral project development scenarios or overly optimistic assumptions.

The following is an example of steps taken by us: EXAMPLES OF ECONOMIC ANALYSES BASED STEPS TAKEN BY THE AMF ON INVALID ASSUMPTIONS We sometimes question certain assumptions because ●● An economic analysis based on a product that does they appear overly optimistic or unrealistic, in which not meet the market’s quality criteria, such as an case we ask the company and the qualified persons industrial mineral concentrate contaminated by to justify the basis for them. If we find the explanation a deleterious element. unsatisfactory, we ask the company to review and, if ●● An economic analysis based on an unproven ore necessary, correct the economic analysis using a more processing technology. balanced or reasonable approach. If there are material deficiencies in economic analyses, we generally ask that corrected documents, including the technical reports and MD&As, be filed together with a press release outlining the material changes to the original disclosure.

How to comply with the requirements in Item 22 (Economic analysis) of Form 43-101F1 and in Part 4A (Forward-looking information) of Regulation 51-102 Companies must ensure that their economic analyses of mineral projects contain a clear statement of, and justification for, the principal assumptions. Furthermore, a company must not disclose forward-looking information unless it has a valid basis for the forward-looking information. Hence, any assumption in the economic analysis must have a reasonable basis in the context of the mineral project. Autorité des marchés financiers 14 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

4 Disclosure for mineral projects (continued)

Finding TAKE NOTE! We noted that companies Economic analyses in technical reports are based on commodity sometimes refer to potentially prices, costs, sales, revenue, and other assumptions and outdated economic analyses projections that can change significantly over short periods without properly describing the of time. As a result, economic information in a technical report current context and including can quickly become outdated. cautionary language.

The following is an example of steps taken by us: EXAMPLE OF A REFERENCE TO AN OUTDATED STEPS TAKEN BY THE AMF ECONOMIC ANALYSIS When a company refers to economic analyses from a An MD&A presents a mineral project and mineral previously filed technical report, we ask that additional reserves based on a technical report filed three years context and cautions be provided in order for the earlier, but makes no reference to a significant drop in disclosure not to be misleading. the market price of the commodity (e.g., iron: ore or rare earth elements) that occurred after the technical If there are material deficiencies in economic analyses, report was filed. Other than a generic one-paragraph we generally ask that corrected documents, including discussion of the risk related to metal price fluctua- the technical reports and MD&As, be filed together with tions, there is nothing in the MD&A enabling readers a press release outlining the material changes to the to understand the actual impact of the significant original disclosure. decrease in the commodity price on the determined value of the project in the technical report. How to comply with the requirements in paragraph 7 (Shelf Life of Technical Reports) of Part 4 (Obligation to File a Technical Report) of the Policy Statement to Regulation 43-101 When economic information in a technical report becomes outdated, the company should provide context for the economic analysis disclosure and include the necessary cautionary language in order for the disclosure not to be misleading.

BE CAREFUL! If you are planning a prospectus distribution and your record contains deficiencies such as the ones described above, you will have to correct them before the AMF will issue a receipt for the prospectus. WHO IS RESPONSIBLE? ●● Primary responsibility for public disclosure remains with the company. In addition to being responsible for selecting the appropriate qualified persons, a company must comply with securities laws when providing disclosure for a mineral project. ●● The qualified person is responsible for preparing or supervising the preparation of the technical report and providing scientific and technical advice in accordance with applicable professional standards. The proper use, by or on behalf of the company, of the technical report and other scientific and technical information provided by the qualified person is the responsibility of the company.

DID YOU KNOW? Regulation 43-101 also applies to non-reporting issuers. The AMF recently intervened with non-reporting issuers to ensure their compliance with the requirements in Regulation 43-101, including subsequent to non-compliant disclosure of mineral resources and reserves and the absence of technical reports supporting such disclosure. Regulation 43-101 applies to all issuers, not just reporting issuers. Autorité des marchés financiers 15 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

5 Certain requirements for distributions

EXPECTED DISCLOSURE REGARDING THE USE OF THE PROCEEDS OF DISTRIBUTION

Finding Some companies do not provide complete disclosure of the use of the proceeds of distribution, particularly if they have negative cash flow from operating activities. It is important for investors to have as much information as possible so they can make informed investment decisions.

The following is an example of corrected disclosure required by us:

Example of a prospectus item regarding the use of the proceeds of distribution NON-COMPLIANT DISCLOSURE CORRECTED DISCLOSURE The net proceeds of the distribution will be The Company had negative cash flow of $2 million approximately $10 million. The company will for the 12-month period ended June 30, 2018. The use the proceeds of the distribution as follows: Company expects to use approximately $500,000 of the net proceeds of the distribution to fund future ● ● $4 million to pay for the purchase of the building; negative cash flow. ●● $2 million to retire series A debentures; and The net proceeds of the distribution will be approxima- ●● $2.5 million to reduce the credit facilities balance. tely $10 million. The company will use the proceeds of The remaining proceeds will be used for general the distribution as follows: corporate purposes. ●● $4 million to pay for the purchase of the building; ●● $2 million to retire series A debentures; and ●● $2.5 million to reduce the credit facilities balance. The remaining proceeds will be used for general corporate purposes.

How to comply with the guidance in CSA Staff Notice 41-307 If a company has negative cash flow from operating activities, this fact should be prominently disclosed in the use-of-proceeds section of the prospectus and the prospectus should indicate whether the company intends to use part of the proceeds of the distribution to fund any negative cash flow. To avoid prospectus receipt refusal, we would also remind companies that they should have sufficient resources to satisfy their short-term liquidity requirements. For more information, please read CSA Staff Notice 41-307. Autorité des marchés financiers 16 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

5 Certain requirements for distributions (continued)

MARKETING MATERIALS

Finding In their marketing materials, some companies disclose adjusted financial measures and often fail to disclose the most directly comparable measures presented in their financial statements or in the financial statements of the acquired company.

The following are examples of corrected disclosure required by us:

Example of marketing materials

NON-COMPLIANT DISCLOSURE CORRECTED DISCLOSURE Financial aspects of the transaction Financial aspects of the transaction Example 1: Example 1:

●● “The acquired company generated income of ●● “The acquired company generated income of $900 million and adjusted EBITDA* of $125 million $900 million, net income of $25 million and adjusted for the fiscal year ended June 30, 2017.” EBITDA* of $125 million for the fiscal year ended Example 2: June 30, 2017.” Example 2: ●● “The acquisition is expected to increase the company’s adjusted net income* by approximately ●● “It is anticipated that the acquisition will have a negative 5% in 2017.” impact of approximately 3% on the company’s net income in 2017, primarily owing to acquisition and integration costs expected to be incurred between * See the section on non-IFRS financial measures at now and the fiscal year-end. However, if these costs are the end of the marketing material. excluded, the company’s adjusted net income* should grow by approximately 5%.”

* See the section on non-IFRS financial measures at the end of the marketing material. How to comply with the guidance in CSA Staff Notice 52-306 (revised) In order not to mislead investors, companies should always present the most directly comparable financial measure determined under IFRS14 presented in their financial statements. Moreover, forward-looking information should not be based solely on an adjusted financial measure.

IMPORTANT REMINDER! Marketing materials must comply with the provisions of Part 13 (Advertising and Marketing in Connection with Prospectus Offerings of Issuers Other than Investment Funds) of Regulation 41-101 and must be filed on or before the day the documents are first provided.

14 International Financial Reporting Standards. Autorité des marchés financiers 17 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

5 Certain requirements for distributions (continued)

FEE PAYABLE IN CONNECTION WITH NORMAL COURSE ISSUER BIDS ON A CANADIAN STOCK EXCHANGE AND ON A FOREIGN STOCK EXCHANGE

Finding Some companies that announce a normal course issuer bid (“issuer bid”) on both a U.S. and a Canadian stock exchange pay a fee only on an estimate of the securities that will be repurchased in Canada, whereas they should be paying a fee on all the securities repurchased.

The following is an example of a corrected calculation required by us: Example of a fee calculation for an issuer bid

For example, a company announces its intention to make an issuer bid for a total of 35 million common shares on the TSX and New York Stock Exchange. The company estimates that 3.5 million shares will be repurchased on the TSX (10% of the total number of securities announced in the news release) and pays a fee based on that number, while filing an undertaking with the AMF to pay the balance if the company repurchases more than the estimated number of shares.

NON-COMPLIANT CALCULATION CORRECTED CALCULATION 3.5 million shares x 0.02% x 25% x $10 = $1,750 35 million shares x 0.02% x 25% x $10 = $17,500 Amount paid: $1,750 Amount paid: $17,500

How to comply with the requirements of the Securities Regulation The AMF’s position is that the fee should be calculated on the maximum number of securities indicated in the news release announcing the issuer bid, without any distinction being made between securities repurchased from securityholders not resident in Canada and those repurchased from securityholders resident in Canada.

Furthermore, when filing the news release on SEDAR,15 companies should take special care to select the proper filing category, i.e. “Securities Acquisitions” - “General – Exempt Issuer Bid Filings” – “News release (section 4.8 of Regulation 62-104)”.

15 System for Electronic Document Analysis and Retrieval, SEDAR, https://sedar.com/. Autorité des marchés financiers 18 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES INFORMING We encourage you to read this section carefully as it provides essential information about specific oversight activities and recent initiatives.

1 AMF issue-oriented reviews

The following is an overview of the issue-oriented reviews completed during 2017-2018:

Non-GAAP financial measures New IFRS We continued our review of non-GAAP financial We reviewed the disclosure included in the MD&As measures disclosed in companies’ annual reports and financial statements of 10 venture issuers prior and press releases and on their websites. Most of the to the application of the new IFRS, IFRS 9 Financial targeted companies were required to amend their Instruments and IFRS 15 Revenue from Contracts with future filings or their website in order to comply with Customers. Most of the targeted issuers were required the guidance in CSA Staff Notice 52-306 (revised). to improve their future filings so that the poten- tial material impacts of the new IFRS were properly disclosed.

Climate change Representation of women on the We completed the project to review company board and in executive officer disclosures of the risks and financial impacts associated positions with climate change and the governance issues related For a third consecutive year, we reviewed disclosure to them. The findings are presented inCSA Staff Notice by TSX-listed companies regarding the representation 51-354.16 of women as prescribed by Regulation 58-101. The findings are presented inCSA Multilateral Staff Notice 58-309.17

Modern slavery Real estate investment trusts We completed a review of company disclosures regar- We completed a review of disclosures by real estate ding modern slavery. The findings are presented in the investment trusts. The findings regarding distributions AMF Staff Notice published on September 4, 2018.18 and non-GAAP financial measures are presented in CSA Staff Notice 52-329.

16 For more information, see under the subheading “Climate change.” 17 For more information, see under the subheading “Women on boards and in executive officer positions.” 18 For more information, see under the subheading “Modern slavery.” Autorité des marchés financiers 19 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

1 AMF issue-oriented reviews (continued)

The following is an overview of issue-oriented reviews in progress or planned for 2018-2019:

Mineral resources of mineral projects IFRS 9 Financial instruments and We will review the disclosure presented in the technical IFRS 15 Revenue from Contracts reports of mining companies in order to ensure with Customers - Application compliance with the requirements in Item 14 (Mineral We will review the disclosure in company financial Resource Estimates) of Form 43-101F1 and check the statements in order to ensure compliance with the new qualifications of the qualified person responsible for the standards IFRS 9 Financial Instruments and IFRS 15 disclosure of mineral resources. Revenue from Contracts with Customers.

Marijuana Representation of women We will review the disclosure by companies carrying on the board and in executive on marijuana-related activities in order to ensure that officer positions disclosure in their documents, including their financial We will once again review the disclosure provided statements and MD&As, complies with IFRS require- in circulars by TSX-listed companies in accordance ments and the regulatory provisions in force. with the disclosure requirements in Regulation 58-101 regarding the representation of women. Autorité des marchés financiers 20 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

An Act respecting transparency 2 measures in the mining, oil and gas industries: Initial report

An Act respecting transparency measures in the mining, oil and gas industries (“ATM”) was assented to on October 21, 2015. Under the ATM, certain enterprises operating in the mining, oil and gas industries are required to provide an annual statement declaring certain payments equal to or greater than $100,000 made to payees specified in the ATM (primarily government entities). The purpose of the ATM is to discourage and detect corruption and foster the social acceptability of projects.

In connection with the ATM, the Regulation respecting the application of the Act respecting transparency measures in the mining, oil and gas industries (“Implementing Regulation”) came into force on August 3, 2017. Guidelines and a General framework for the application of monetary administrative penalties were also published.

The Ministère de l’Énergie et des Ressources naturelles (Québec Energy and Natural Resources) is responsible for implementing the ATM, but the AMF has been given responsibility for its administration.

Be careful! The ATM sets out significant penalties for non-compliance with the Act. The AMF can impose an administrative penalty of $1,000 for each day that an entity subject to the ATM is late in sending a statement.

Important reminders

●● We encourage you to determine whether your company is subject to the ATM. ●● The annual statement must be provided to the AMF on SEDAR within 150 days of your financial year-end. ●● A statement filed in compliance with the requirements of a competent authority whose regulations are designated as acceptable substitutes in the Implementing Regulation may be substituted for the statement required under the ATM. This includes the reports filed under the federalExtractive Sector Transparency Measures Act – Be careful! You must still provide this substitute statement to the AMF on SEDAR. Autorité des marchés financiers 21 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

2 An Act respecting transparency measures in the mining, oil and gas industries: Initial report (continued)

Statements received by the AMF during the fiscal year As at March 31, 2018, the AMF had received 42 statements under the ATM. The list of entities subject to the ATM that filed statements can be found on the AMF website. The following are some highlights from the 42 statements:

BREAKDOWN OF PAYMENTS REPORTED BY COUNTRY:

Total value of payments reported Total value of payments reported in all countries: $17.1 billion in Canada: $1.3 billion Total value of payments reported Total value of payments reported in all countries: $17.1 billion in Canada:3% 2 %$1.3 billion

3% 2% A A 13% A F 30% A C 13% 36% F 30% C 36% U S 14% 52% C U S 14% 4% 52% C 6% N T 4% 7% O N T 6% 32% O 7% O 32% O

TOTAL VALUE OF PAYMENTS REPORTED IN QUÉBEC BY PAYMENT CATEGORY: Total value of payments reported in Québec: $179.1 million Total value of payments reported in Québec: $179.1 million 179.1

179.1 150.1

M 150.1 16.5 M 4.7 7.2 0.3 0.0 0.2 16.5 7.2 0.3 4.7 0.0 0.2 T R F D I O T R F D I O Autorité des marchés financiers 22 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

Growing interest in socially 3 responsible investing

Socially responsible investing is an area of increasing ●● Governance-related criteria include the convergence of concern for the financial sector. Socially responsible officer and shareholder interests, board independence investing is investing that incorporates environmental, and composition (including diversity and representation social and governance (“ESG”) criteria into investment of women), shareholder rights, and transparency. selection and management. We are seeing an increasing appetite among investors for ●● Environmental criteria include the impact of a investments that take ESG criteria into account. We are company’s operations on the environment, including therefore taking an interest in the thoughts and actions greenhouse gas emissions, water and waste emanating from regulators regarding socially responsible management, site restoration, biodiversity and habitat investing based on ESG criteria. We are also focusing protection, as well as environment-related risks and on information available to investors and on companies’ opportunities. disclosure practices in this area, as evidenced by the following three projects. ●● Social criteria include human rights, the impact on communities, labour relations and working conditions, and child labour and forced labour, as well as the resulting risks and opportunities.

Climate change The CSA completed a project to review company Our work led to the identification of several key themes. disclosures of risks and financial impacts associated with In particular, we: climate change and of the governance issues related to ● them. The project focused on climate change-related risks ● developed a better understanding of Canadian and opportunities that impact a company and its business, companies’ current disclosure practices in relation as opposed to the impact a company has or may have on to climate change-related information; climate change. The findings of this project are outlined ●● gained insight into perspectives on the materiality of in CSA Staff Notice 51-354, published on April 5, 2018. climate change-related risks and opportunities and the associated financial impacts; As part of this project, we also carried out a targeted review of public disclosure practices of selected large ●● consulted with investors in order to understand their Canadian companies with respect to climate change-related disclosure needs, whether those needs were being met information. In addition, we conducted a survey to solicit by companies, and their suggestions for improvement; feedback from a wider range of TSX-listed companies, as ●● consulted with companies with respect to their well as focused consultations with companies, investors and interactions with investors, as well as the challenges other stakeholders. involved in identifying climate change-related risks and opportunities, quantifying impacts, and preparing meaningful disclosure of material information; and ●● analyzed disclosure requirements and voluntary disclosure frameworks internationally in relation to climate change-related risks, opportunities and impacts, as well as possible future trends in their development. Autorité des marchés financiers 23 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

3 Growing interest in socially responsible investing (continued)

Next steps

Future CSA work plans are anticipated to include the ●● monitoring the quality of companies’ disclosure and following: the evolution of best disclosure practices in this area, to assess whether further work needs to be done to ● ● developing guidance and initiatives to educate ensure that Canadian companies’ disclosure continues to companies on the business risks and opportunities and improve, and whether investors require additional types potential financial impacts of climate change; of climate change-related disclosure to make informed ●● considering new disclosure requirements regarding investment and voting decisions; and corporate governance in relation to risks, including ●● monitoring developments in reporting frameworks and climate change-related risks, and risk oversight and determining whether certain disclosure requirements in management; relation to greenhouse gas emissions are warranted in the future.

Women on boards and in executive officer positions On October 5, 2017, the AMF and other participating jurisdictions published CSA Multilateral Staff Notice 58-309 in order to report their findings of a review of non-venture issuer disclosure regarding the representation of women as prescribed by Regulation 58-101. This was the third consecutive annual review of this type conducted by us. Our review after three years found that:

●● the requirements have generally resulted in enhanced disclosure by companies regarding the representation of women. ●● the response rate for each disclosure requirement was 93% or higher; and ●● the requirements have had a positive impact on the representation of women on boards. For information purposes, the table below presents, for specific indicators, the data complied by the AMF for TSX-listed Québec companies since the coming into force of the disclosure requirements regarding the representation of women.

2015 2016 2017 2018 (64 (66 (64 (59 companies19) companies20) companies21) companies22) Board seats occupied by women for all the companies 18% 18% 20% 21% reviewed Companies with at least one woman on their board 80% 80% 81% 88% Companies with at least three women on their board 20% 24% 27% 29% Companies that adopted a policy relating to the 32% 38% 41% 53% representation of women on their board Companies that adopted targets for the representation 16% 17% 20% 29% of women on their board Companies that considered the representation of 75% 76% 83% 85% women in their board appointments

19 With a fiscal year-end between December 31, 2014 and March 31, 2015 and that filed a management information circular before July 31, 2015. 20 With a fiscal year-end between December 31, 2015 and March 31, 2016 and that filed a management information circular before July 31, 2016. 21 With a fiscal year-end between December 31, 2016 and March 31, 2017 and that filed a management information circular before July 31, 2017. 22 With a fiscal year-end between December 31, 2017 and March 31, 2018 and that filed a management information circular before July 31, 2018. Autorité des marchés financiers 24 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

3 Growing interest in socially responsible investing (continued)

Consultation The AMF continues to pay special attention to the held a round table on March 28, 2018 in order to obtain representation of women. For example, the AMF published stakeholder comments on the effectiveness of disclosure a notice and request for comment on January 15, 2018 and requirements regarding the representation of women.

Next steps The AMF and the other participating jurisdictions have shared their findings and the comments received during their respective consultations and will determine whether additional measures are required. These measures could include:

●● Amendments to Regulation 58-101; ●● The addition of guidelines to Policy Statement 58-201. Moreover, the findings of a fourth review of disclosures of non-venture issuers (that had year-ends between December 31, 2017 and March 31, 2018) in accordance with disclosure requirements regarding the representation of women will be published by the AMF and the other participating jurisdictions in the fall of 2018.

Modern slavery Modern slavery, a human rights violation, is a concern in TSX-listed companies with a market capitalization of Canada and internationally. Forced labour, human trafficking $1 billion or more. These companies represent a range of and child labour are all manifestations of modern slavery. industries and have international operations or greater potential exposure to issues related to modern slavery. For Under securities laws, companies are required to disclose each company, we reviewed the following documents: AIFs, certain information regarding modern slavery in their information circulars, MD&As, codes of conduct and ethics, continuous disclosure documents if such information is and voluntary social responsibility reports. material. Our findings are presented in theAMF Staff Notice At the beginning of 2018, we conducted an issue- published on September 4, 2018. The notice provides oriented review in order to obtain an overall picture of the guidance to companies on existing disclosure requirements information regarding modern slavery currently disclosed relating to modern slavery and sets out the AMF’s by a sampling of large companies. We selected twenty (20) expectations in this area.

Be careful! Canadian companies can be exposed to modern slavery directly or indirectly. For example, a mining company active in some parts of the world may be exposed to the issue directly, whereas a company active in the retail industry may be exposed to it via its supply chain. The International Labour Organization has identified the following as the sectors most likely to be exposed to this issue: construction, manufacturing, domestic work, entertainment and agriculture. Autorité des marchés financiers 25 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

Growing interest in socially responsible investing (continued) 4 Booming industry sectors

We are seeing an increasing investor appetite for certain industry sectors, including the marijuana and cryptocurrency industries. As regulator, we are interested in, and have published several notices providing key guidance on, these developments. The following are some points to remember:

The burgeoning of companies with U.S marijuana-related activities Given the volatility in the equity markets, the CSA the disclosure they provide and to publicly communicate published a revised version of CSA Staff Notice 51-352 any new disclosure forthwith, including in the event of on February 8, 2018. government policy changes or the introduction of new or amended guidance, laws or regulations regarding marijuana The marijuana industry has accelerated in recent years as a regulation. number of jurisdictions, including Canada and certain U.S. states, continue to explore liberalization measures around We are closely monitoring disclosure regarding the marijuana laws. While most jurisdictions have a uniform following items, based on the scale of the company’s national framework for marijuana regulation, in the U.S., marijuana-related activities: there is a conflict between state and federal law. Marijuana- related activities, such as the cultivation, possession or • risks associated with marijuana-related activities; distribution of marijuana, are illegal under U.S. federal law, • the fact that marijuana is illegal in the United States; and whereas they are legal under the laws of certain U.S. states. • the legislative and regulatory framework applicable to In light of this legislative situation and the rescission in marijuana-related activities in the jurisdiction in which the January 2018, by U.S. Attorney General Jeff Sessions, company is located, as well as how the company complies of the memorandum issued by James M. Cole (the Cole with that framework . Memorandum), CSA staff published CSA Staff Notice 51-352 (revised) to provide further guidance on its specific We would remind companies that their disclosure disclosure expectations for companies with, or in the documents, such as prospectuses, AIFs and MD&As, must process of developing, U.S. marijuana-related activities. always fairly present all material facts and risks so that investors can make informed investment decisions. We may We expect companies with operations in the United States intervene with companies operating in the United States if to evaluate and monitor their public disclosures on an they do not provide the appropriate disclosure described ongoing basis. We also expect such companies to modify in CSA Staff Notice 51-352 (revised).

DID YOU KNOW? In various circumstances, the law allows the AMF to share information with police forces, law enforcement agencies and tax authorities as these entities are tasked with the enforcement of laws in Québec such as the tax laws and the Criminal Code. Moreover, information such as the places of residence of investors who purchase securities through exempt distributions is public and may be included in such sharing of information, including when the residence is located in a tax haven.

What about the Québec market? For 2017-2018, Québec companies active in the marijuana industry financed their operations by way of both private placements and prospectus distributions. During this period, they raised over $261 million. They raised more than $5 million by way of private placements with Québec investors and approximately $40 million from non-residents of Québec. Autorité des marchés financiers 26 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

4 Booming industry sectors (continued)

The first cryptocurrency or token offerings

●● On August 24, 2017, the CSA published CSA Staff Notice 46-307, which provides guidance on how it applies WHAT IS AN ICO? securities laws to ICOs, cryptocurrency investment funds An initial cryptocurrency or token offering, more and cryptocurrency trading platforms. In the Notice, the commonly known as an ICO, is a means of raising CSA stated that, in many instances reviewed by them, the capital over the Internet. It is generally used to finance a cryptocurrencies or tokens issued in an ICO constituted technology start-up. Instead of shares that will be listed securities because they satisfied the four-prong test for an on a stock exchange, investors are offered digital assets, investment contract. In Québec, an investment contract or tokens, whose potential value and use will be closely is defined in theSecurities Act. The Notice also states that tied to the success of the project being financed. To find each offering is unique and must be assessed on its own out more about ICOs and their inherent risks, please visit characteristics. The CSA will consider substance over the AMF’s website. form. ●● Cryptocurrency or token offerings can provide new opportunities for companies to raise capital. However, they can also raise investor protection concerns. Those of greatest concern to the AMF include: ●● Audit: How will issuers comply with financial disclosure requirements and accounting standards in the absence of standards designed specifically for blockchain technology and cryptocurrencies? How will cryptocurrencies and tokens be valued? Will one or multiple cryptocurrency exchange(s) be used, and how will such exchange(s) be selected? How will an issuer be able to prove cryptocurrency or token ownership? ●● Custody: How can custody requirements be satisfied in a decentralized model? Does the custodian have expertise that is relevant to holding cryptocurrencies? For example, should the custodian have experience with hot and cold storage, security measures to keep cryptocurrencies protected from theft, and the ability to segregate the cryptocurrencies from other holdings as needed? ●● On June 11, 2018, the CSA published CSA Staff Notice 46-308 to respond to inquiries relating to offerings of tokens referred to as “utility tokens”. The Notice sets out specific situations in which a token offering can constitute a securities distribution. ●● CSA and AMF investigations staff are actively monitoring the ICO market to detect any risk of fraud, market manipulation or illegal distributions. As a result of the AMF’s intervention, Québec’s Financial Markets Administrative Tribunal has issued freeze and cease trade orders against certain issuers23 for activities related to investments in cryptocurrencies or tokens that violate securities law requirements. At the AMF’s request, the Superior Court ordered the appointment of a receiver over certain property belonging to the mastermind behind an ICO and granted the receiver the powers needed to take possession of the bitcoins held by that individual.

Be careful! In May 2018, more than 40 U.S. and Canadian member jurisdictions of the North American Securities Administrators Association (NASAA), including the AMF, participated in one of the largest coordinated series of enforcement actions to crack down on fraudulent ICOs/ITOs and cryptocurrency-related investment products and the individuals behind them.

23 PlexCoin, CreUnite, Usi-Tech, Antivolatility Coin and ZZZ Coin. Autorité des marchés financiers 27 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

Booming industry sectors (continued) 5 More reminders

General prospectus requirements: Financial statements must be IFRS-compliant! Currently, certain publicly accountable enterprises are not permitted to use a financial reporting framework other than IFRS when preparing their general purpose financial statements.

AS REQUIRED BY THE ACCOUNTING STANDARDS BOARD IN CANADA, IF AN ENTITY FALLS WITHIN THE DEFINITION OF A PUBLICLY ACCOUNTABLE ENTERPRISE, IT IS REQUIRED TO PREPARE ITS GENERAL PURPOSE FINANCIAL STATEMENTS IN ACCORDANCE WITH IFRS (I.E., PART I OF THE CPA CANADA HANDBOOK – ACCOUNTING).

AS A RESULT, A PUBLICLY ACCOUNTABLE ENTERPRISE (WHETHER THE ISSUER IS SMALL, MEDIUM-SIZED OR LARGE) CANNOT CHOOSE BETWEEN IFRS AND THE ACCOUNTING STANDARDS FOR PRIVATE ENTERPRISES (I.E. PART II OF THE CPA CANADA HANDBOOK – ACCOUNTING).

Our regulations already offer venture issuers substantial continuous disclosure relief, examples of which are presented in the table below. The decision to avail themselves of that relief is theirs and theirs alone.

Planning an IPO? Here are some points you need to remember regarding requirements affecting the annual financial statements to be included in a long form prospectus.

Type of issuer Required annual financial statements Audit requirements and basis of accounting

●● Statement of comprehensive income, statement of changes in equity and statement of cash flows for the three ●● Annual financial statements must be Non-venture issuer most recently completed financial years. IFRS-compliant and audited. ●● Statement of financial position as at the end of the two most recently completed financial years.

●● Statement of comprehensive income, statement of changes in equity and ●● Annual financial statements must be statement of cash flows for the two most IFRS-compliant and audited. Venture issuer recently completed financial years. ●● Note the exception to the requirement ●● Statement of financial position as at the to present the third financial year. end of the two most recently completed financial years.

●● Statement of comprehensive income, ●● Annual financial statements must be IFRS- statement of changes in equity and compliant, and the most recent completed statement of cash flows for the two most financial year must be audited. Venture issuer recently completed financial years. that qualifies as a ●● Note that there are two significant ●● Statement of financial position as at the “junior issuer”24 exceptions: the exception from the end of the two most recently completed requirement to present the third financial financial years. year and the exception from the audit requirement for the second financial year.

24 Refer to the definition inRegulation 41-101, which provides thresholds of less than $10 million for certain financial statement line items. Autorité des marchés financiers 28 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

5 More reminders (continued)

Are you planning a significant acquisition pursuant to complied with the disclosure requirements of the which securities of the acquired business will be exchanged OTC Markets by preparing their financial statements for securities of your company, or are you planning a in accordance with U.S. GAAP. restructuring transaction? For more detailed information, please refer to Regulation The information to be provided about the acquired 51-105, Policy Statement to Regulation 51-105 and business may constitute Prospectus-level disclosure,25 Regulation 52-107. as summarized in the table above. Furthermore, we would remind companies that they must provide complete disclosure regarding related persons who participate in the transaction. Distributions to persons We encourage companies to pay close attention to the established outside Québec: disclosure requirements and to be proactive in consulting File your notice with the AMF with us so as to avoid pitfalls when closing a transaction. at the right time! The AMF will intervene with companies that do not comply with these requirements, including the inclusion of the In connection with the filing of a notice required under required financial statements. The intervention may be in section 12 of the Securities Act for the filing of a U.S. the form of a request to include the missing information registration statement for a distribution in the United States and re-file the document in question. If the situation is (via a Form F-3 or S-3), we have observed that some issuers not rectified in a timely manner, the AMF may take other file the notice after filing the shelf prospectus outside measures, up to and including postponing the meeting Québec and before filing the first supplement related to it. of shareholders called to approve the transaction. Reminder: Be sure to file the notice with the AMF before filing the shelf prospectus outside Québec, as required under section 12 of the Securities Act. Issuers quoted in the U.S. over-the-counter markets: Statutory deadlines Don’t forget Regulation 51-105! for file processing If your company is not listed on a stock exchange, but has issued securities quoted in a U.S. OTC market, it could We would remind issuers that securities laws set out be a reporting issuer in Québec pursuant to Regulation statutory deadlines for the processing by AMF staff of files 51-105. This will be the case if its business is directed or such as prospectuses and applications for exemptive relief. administered from Québec. We recently noticed an increase in the number of instances of issuers requesting shorter processing times. A company that is a reporting issuer in Québec pursuant to Regulation 51-105 must comply with the continuous The AMF acts diligently when processing all its files. disclosure requirements in Regulation 51-102, including We understand that special circumstances may exist. the requirement to prepare its financial statements in In some special cases for which justification is provided, accordance with IFRS. However, OTC reporting issuers that the AMF may consider shortening processing times. are SEC filers may file the documents they file with the SEC. Otherwise, the statutory time limits apply. There were a few cases during the most recently completed fiscal year, including in reviews of applications to lift cease trade orders, where we required non-SEC-filing OTC reporting issuers to prepare their financial statements in accordance with IFRS, notwithstanding their having

25 Refer to the provisions of Item 14.2 of Form 51-102F5 of Regulation 51-102. Autorité des marchés financiers 29 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

More reminders (continued) 5 More reminders (continued)

We would also remind issuers that, in the case of dual exemptive relief under the CSA passport system, a period of five days is generally required for an Ontario Securities Commission (“OSC”) decision. Moreover, we would remind issuers that, in order to obtain a receipt for a prospectus on the date on which it is filed on SEDAR, the filing must be compliant and completed before 3 p.m. (Eastern standard time). After that time, the AMF cannot guarantee that the prospectus receipt will be issued on the same day. Don’t forget that the AMF still allows issuers to confidentially pre-file a draft prospectus related to a multi-jurisdictional offering.

SEDI and SEDAR profiles: Your best calling card as an issuer! We would remind you that issuers required to create a SEDI or SEDAR profile must promptly do so. Once created, the profile should be kept up to date at all times. It is your best calling card as an issuer and will prevent undue delays! Autorité des marchés financiers 30 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

Recapitalization of federally chartered 6 banks (bail-in) and ramifications for Québec

During the 2007-2008 global financial crisis, the financial We are involved in the bail-in work relating to the federally system was shaken. Many banks outside Canada found chartered banks and the Desjardins Group: themselves in financial distress and were saved by an ● injection of public funds, commonly referred to as a ● At the federal level, we are involved in defining a bail-out. securities regulatory framework for the implementation of a possible bail-in. We have participated in work on Regulators implemented multiple measures internationally the bank bail-in with the Canada Deposit Insurance and in Canada and Québec to prevent a recurrence of Corporation, the Office of the Superintendent of this situation. Regulators also adopted new enhanced Financial Institutions, the Department of Finance regulatory capital requirements and designated large (Canada), the OSC and the TSX in order to ensure that financial institutions as domestic or global systemically a possible future bail-in complies with securities laws. important financial institutions. The federal government enacted bail-in regulations on March 26, 2018. They will come into force on September Canada and Québec joined international efforts and 23, 2018, as of which time the banks will be able to issue designated major Canadian banks and the Desjardins debt securities that will be subject to the terms of a Group as systemically important. These financial bail-in. institutions have chosen to implement a bail-in system as one of the means to deal with the unlikely event of ●● In Québec, we are participating, in our dual role as a financial failure, should there be another crisis. prudential regulator and a securities regulator, in work on the regulatory framework for the Desjardins Group bail- in. In particular, we are participating in the establishment of a framework defining the conditions for the issuance of securities that could be issued if Group Desjardins were to become the subject of a bail-in. ●● Group Desjardins’ bail-in regime is similar to the federal regime. On June 13, 2018, Bill 141, An Act mainly to improve the regulation of the financial sector, the protection of deposits of money and the operation of financial institutions, was enacted and assented to by the National Assembly. A major portion of the new oversight and resolution powers came into effect on July 13, 2018. Certain regulatory powers will be set out in draft regulations over the coming months. Autorité des marchés financiers 31 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

7 Regulatory initiatives

The following is an overview of the regulatory initiatives and staff notices that came into force or were published during the last year, or are pending or proposed, relating to company financing and continuous disclosure requirements. The table is divided in two parts: projects on which the AMF is the lead or co-lead and other projects in which the AMF is a participant.

PROJECTS ON WHICH THE AMF IS THE LEAD OR CO-LEAD

Draft regulations Important Summary of initiatives and notices date

Regulation to The CSA repealed the exemption set out in section 2.14 of Regulation 45-102 These amend Regulation (First Trades in Securities of a Non-Reporting Issuer Distributed Under a amendments 45-102 respecting Prospectus Exemption) and introduced a new prospectus exemption for the came into Resale of resale of securities of a foreign company that is not a reporting issuer in any force on June Securities and jurisdiction of Canada. For the purpose of the new exemption: 12, 2018. amendment of ● Policy statement ● the resale must be on an exchange, or a market, outside of Canada or to a to Regulation person outside of Canada; and 45-102 respecting ●● the issuer of the security must be a foreign company. Resale of The new exemption sets aside the former ownership threshold, which was 10%, Securities as a condition for determining a minimal connection to Canada.

CSA Staff The CSA published a staff notice responding, with examples, to inquiries on the Published on Notice 46-308 applicability of securities laws to offerings of coins or tokens, including ones June 11, 2018. – Securities Law that are commonly referred to as “utility tokens”. Implications for Offerings of Tokens Autorité des marchés financiers 32 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

7 Regulatory initiatives (continued)

PROJECTS ON WHICH THE AMF IS THE LEAD OR CO-LEAD

Draft regulations Important Summary of initiatives and notices date

CSA Staff The CSA published a staff notice providing an update on the consultation for Published Notice 51-353 – reducing the regulatory burden for non-investment fund reporting issuers. on March 27, Update on CSA Based on its consideration of the feedback it received, the CSA will initiate 2018. Consultation certain policy projects, including those described below. There is no guarantee Paper 51-404 that any changes to our regulatory regime will be implemented in CSA Considerations member jurisdictions. for Reducing Regulatory Removing or modifying the criteria to file a business acquisition report Burden for (“BAR”): Non-Investment The CSA might modify the BAR requirements to take into consideration relief Fund Reporting granted to date, the time and cost involved in preparing BARs, and the value Issuers of the disclosure provided.

Revisiting the primary business requirements in connection with an IPO: The CSA is looking at various ways to clarify its interpretation of Item 32 (Financial Statement Disclosure for Issuers) of Form 41-101F1 with a view to specifying the requirements pertaining to the historic financial statements required to be included in an IPO prospectus that support the company’s primary business.

Alternative to the prospectus model: The CSA is exploring alternative distribution models to the prospectus in order to facilitate and speed up issuer access to the public markets.

Reducing or streamlining certain continuous disclosure requirements: The CSA might modify certain continuous disclosure requirements in order to take the following into consideration:

●● eliminating duplicative disclosure among the financial statements, MD&A, and other documents required under Regulation 51-102 forms; ●● consolidating two or more of the financial statements, MD&A and AIF into one reporting document; and ●● reducing the volume of information in annual and interim filings in order to prevent excessive disclosure from obscuring key information or otherwise improve the quality and accessibility of disclosure. Enhancing electronic delivery of documents for investors: The CSA will consider measures that would further facilitate electronic delivery of documents and would, in particular, switch the current default to electronic delivery. Autorité des marchés financiers 33 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

Regulatory initiatives (continued) 7 Regulatory initiatives (continued)

PROJECTS ON WHICH THE AMF IS THE LEAD OR CO-LEAD

Draft regulations Important Summary of initiatives and notices date

Proposed National The CSA published a proposed regulation to regulate companies’ disclosure of Published on Instrument 52-112 non-GAAP and certain other financial measures. September 6, Non-GAAP and 2018. Other Financial The purpose is to enable the CSA to intervene with companies to help ensure Measures that the information disclosed does not mislead investors. When it comes into The comment Disclosure force, the regulation will replace CSA Staff Notice 52-306 (revised) Non-GAAP period will Financial Measures. end on December 5, 2018.

CSA Staff Notice The CSA published a staff notice providing an update on the consultation Published on 52-330 Update on on the appropriateness of the approach for determining director and audit July 26, 2018. CSA Consultation committee member independence. Paper 52-404 - Approach to Considering the realities of the Canadian market and the comments received Director and during the consultation, the CSA has concluded that the current approach Audit Committee should be maintained. Member Independence

IFRS – Reminder The AMF published a reminder concerning new IFRS with respect to revenue, Published on concerning new financial instruments and leases. The reminder seeks to make companies aware September 21, IFRS with respect of the need to provide disclosure on the possible impact of these new IFRS, 2017. to revenue, finan- due to their broad scope. cial instruments and leases

Draft Regulation The Regulation prescribes and simplifies the framework governing certain real The comment respecting real estate distributions by proposing a prospectus exemption in respect of the sale period ended estate prospectus of real estate investment contracts specified in them. on December and registration 24, 2016. exemptions The Regulation also proposes a prospectus and registration exemption in respect of the distribution of a security giving a right of exclusive use in an immovable.

Notice rela- The AMF published a notice providing companies with guidance and setting Published on ting to modern out AMF staff’s expectations regarding current disclosure requirements September 4, slavery disclosure relating to modern slavery. For more information, see under the subheading 2018. requirements “Modern slavery.” Autorité des marchés financiers 34 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

7 Regulatory initiatives (continued)

OTHER PROJECTS IN WHICH THE AMF IS A PARTICIPANT

Draft regulations and Important Summary of initiatives notices date

CSA Notice and The CSA is proposing amendments to Regulation 25-101 respecting The comment Request for Designated Rating Organizations to reflect new requirements. These period ended Comment Relating requirements are already in force in Europe. The amendments would, on October 4, to Designated Rating in particular, allow the European Union to continue to recognize the 2017. Organizations Canadian regulatory regime as “equivalent” to its own.

CSA Notice of The CSA amended several regulations in order to: These amend- Publication of ments came ● Amendments Relating ● allow the designation of Kroll Bond Rating Agency Inc. as a designated into force on to Designated Rating rating organization for purposes of the eligibility of its ratings for limited June 12, 2018. Organizations 26 regulatory purposes; and ●● allow corporate reorganizations of designated credit rating organizations without the need to amend the regulations each time.

CSA Notice and The CSA is proposing amendments to Regulation 45-106 and Regulation The consul- Request for Comment 31-103 in order to better regulate the distribution of syndicated mortgages tation period – Amendments and harmonize exemptions across all jurisdictions. ended on relating to Syndicated June 6, 2018. Mortgages

CSA Notice and The participating jurisdictions amended the report of exempt distribution Published on Request for Comment found in Form 45-106F1 (Report of Exempt Distribution) of Regulation July 19, 2018. – Regulation to amend 45-106 in order to provide greater clarity and flexibility regarding the Regulation 45-106 certification requirement. respecting Prospectus Exemptions

CSA Staff Notice The CSA published a revised staff notice providing further guidance Published on 51-352 (revised) - on its disclosure expectations for companies with U.S. marijuana-related February 8, Issuers with U.S. activities. The notice was a revision of the version dated October 16, 2017. 2018. Marijuana-Related Activities For more information, see under the subheading “The burgeoning of companies with U.S. marijuana-related activities.”

CSA Staff Notice The CSA published a staff notice summarizing the findings of the project to Published on 51-354 – Report on review companies’ disclosure of risks and financial impacts associated with April 5, 2018. Climate change- climate change and related governance and presenting plans for future related Disclosure work. For more information, see under the subheading “Climate change.” Project

26  The following are the amended regulations and instruments: Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations; Regulation 33-109 respecting Registration Information; Regulation 41-101 respecting General Prospectus Requirements; Regulation 44-101 respecting Short Form Prospectus Distributions; Regulation 44-102 respecting Shelf Distributions; Regulation 45-106 respecting Prospectus Exemptions; Regulation 51-102 respecting Continuous Disclosure Obligations; Regulation 81-102 respecting Investment Funds; Regulation 81-106 respecting Investment Fund Continuous Disclosure; Policy Statement to Regulation 21-101 respecting Marketplace Operation; and Policy Statement to Regulation 81-102 respecting Investment Funds. Autorité des marchés financiers 35 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

Regulatory initiatives (continued) 7 Regulatory initiatives (continued)

OTHER PROJECTS IN WHICH THE AMF IS A PARTICIPANT

Draft regulations and Important Summary of initiatives notices date

CSA Staff Notice The CSA published a staff notice summarizing the results of the CDR Published on 51-355 – Continuous Program for the fiscal years ended March 31, 2017 and 2018. The notice July 19, 2018. Disclosure Review includes common deficiencies that were observed as well as reminders Program Activities for regarding the requirements applicable to companies. the fiscal years ended March 31, 2018 and March 31, 2017

CSA Staff Notice The CSA published a staff notice setting out the results of a review of Published on 52-329 – Distribution important areas of disclosure for real estate investment trusts and real April 12, 2018. Disclosures and estate operating companies: distributions and non-GAAP financial Non-GAAP Financial measures. Measures in the Real Estate Industry

CSA Multilateral The participating jurisdictions reviewed the corporate governance Published on Staff Notice 58-309 disclosure of 660 non-venture issuers with year-ends between December October 5, – Staff Review of 31, 2016 and March 31, 2017 under the disclosure requirements regarding 2017. Women on Boards the representation of women set out in Regulation 58-101. and in Executive Officer Positions – For more information, see under the subheading “Women on boards and in Compliance with executive officer positions.” Regulation 58-101 respecting Disclosure of Corporate Governance Practices

Notice and Request The AMF published a notice and request for comment seeking feedback The comment for Comment - within the context of the evaluation of the effectiveness of the disclosure period ended Women on Boards requirements in Regulation 58-101 regarding the representation of women on March 2, and in Executive on boards and in executive officer positions. 2018. Officer Positions of Non-Venture Issuers For more information, see under the subheading “Women on boards and in executive officer positions.”

CSA Staff Notice The CSA published a notice and request for comment outlining the Published on 61-303 and Request regulatory issues related to soliciting dealer arrangements and seeking April 12, 2018. for Comment – comments and feedback on their use, which generally involves a company Soliciting Dealer agreeing to compensate a dealer to solicit securityholders in connection Arrangements with corporate transactions. Autorité des marchés financiers 36 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

7 Regulatory initiatives (continued)

OTHER PROJECTS IN WHICH THE AMF IS A PARTICIPANT

Draft regulations and Important Summary of initiatives notices date

CSA Staff Notice The CSA published a revised notice on the use of the rights offering Published on 45-323 (revised) – exemption. This update reflects two years of reviews of the use of this July 26, 2018. Update on Use of exemption since the amendments came into force in December 2015. the Rights Offering Exemption in Regulation 45-106 respecting Prospectus Exemptions

26 Autorité des marchés financiers 37 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

8 The AMF on the international stage

Over the past year, Corporate Finance participated in the Involvement in the work work that led to the following papers: of IOSCO Consultation Paper on Strengthening the Governance and Oversight of the International Audit-related Standard- Issuer Accounting, Audit and Disclosure setting Boards in the Public Interest (Committee 1) On November 9, 2017, the Monitoring Group (consisting Committee 1 of the International of IOSCO, the Basel Committee on Banking Supervision, Organization of Securities Commissions the European Commission, the Financial Stability Board, (“IOSCO”), on which the AMF sits, is the International Association of Insurance Supervisors dedicated to improving the development and the World Bank Group) published the Consultation of accounting and auditing standards and Paper on Strengthening the Governance and Oversight of enhancing the quality and transparency of the information the International Audit-related Standard-setting Boards that investors receive from listed firms, including financial in the Public Interest, which presents various options and institutions. It also considers matters related to the proposals for improving governance, accountability and application of these standards in practice. oversight of the audit and assurance standard-setting ICO Consultation Network process and seeks feedback from stakeholders. Corporate Finance participates in the ICO Consultation The consultation paper sets out three principal areas of Network, a committee established in March 2018 and concern that emerged from discussions with stakeholders: composed of IOSCO members that provides a forum for ●● the adverse effect on stakeholder confidence in the sharing experiences, approaches and concerns regarding existing standards as a result of a perception of undue cryptocurrency offerings. influence by the profession; Fintech Network ●● the risk, partly because of such undue influence, that Corporate Finance also participates in the Fintech Network, standards are not developed fully in the public interest; which is designed to facilitate the exchange of fintech- and related information, knowledge and experiences among ●● the relevance and timeliness of standards. members. The network consists of a committee comprised The Monitoring Group is proposing options for reform, of IOSCO members that is currently developing the scope including changes to the number, composition, strategic of matters to be considered by the committee. focus and nominations process of standard-setting boards, as well as their current oversight arrangements. Autorité des marchés financiers 38 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

8 The AMF on the international stage (continued)

Consultation Report on Good Practices for Audit Committees in Supporting Audit Quality Our comments to the

On April 24, 2018, IOSCO published its Consultation Report International Accounting on Good Practices for Audit Committees in Supporting Standards Board (IASB) Audit Quality, which invites stakeholder feedback on IOSCO proposals in this area. The report proposes features In October 2017, the AMF, jointly with certain other that an audit committee should have in order to be more participating jurisdictions, provided comments on the effective in promoting and supporting audit quality. These Disclosure Initiative – Principles of Disclosure Discussion features include the qualifications and experience of audit Paper published by the IASB with a view to enhancing committee members, their level of knowledge in the field disclosure in financial statements. Comments included of financial reporting and audit, whether they have ques- the following: tioning minds and appropriately challenge management and auditors, and whether they have adequate capacity ●● Performance measures in the financial statements and resources. We agree that entities should have some latitude in presenting performance measures in their financial The report also proposes good practices that audit statements. However, there should be a general committees can follow when: disclosure standard prohibiting an entity from presenting ●● recommending the appointment of an auditor; or disclosing performance measures that are not relevant to an understanding of the financial statements. ●● assessing auditors; ● ●● setting audit fees; ● Non-IFRS compliant disclosures in financial statements ●● facilitating the audit process; We disagree that an entity should be able to able to disclose information in the financial statements that ●● communicating with the auditor; is inconsistent or in conflict with IFRS. ●● assessing auditor independence; and ●● Information outside the financial statements ●● assessing audit quality. While we favour reducing duplication, we disagree with the principle that an entity can provide information that is necessary to comply with IFRS outside the financial Other areas of involvement statements. on the international scene ●● Unusual or infrequently occurring items Global Financial Innovation Network We agree with the presentation in the financial state- ments of items classified as unusual or infrequently Since February 2018, Corporate Finance has participated occurring. However, we believe that the determination in discussions with other international regulators in order of such items could be subjective and therefore contrary to create the Global Financial Innovation Network (GFIN), to the principle of financial statement neutrality. an international exchange network on financial innovation. In addition to the AMF, over ten international regulators are involved in the network, including the OSC, the United Kingdom’s Financial Conduct Authority and the Australian Securities & Investments Commission. Corporate Finance was involved in the work to define how the GFIN will operate. Autorité des marchés financiers 39 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

The AMF on the international stage (continued) 8 The AMF on the international stage (continued)

Our comments to IOSCO In February 2018, the CSA Chief Accountants Standing Committee commented on the Monitoring Group’s Consultation Paper on Strengthening the Governance and Oversight of the International Audit-related Standard- setting Boards in the Public Interest.27 The Committee supports the objective of strengthening aspects of the governance and oversight of the standard-setting process. It identified key areas that would help to achieve this objective and that differ from those proposed by the Monitoring Group.

27 For a description of the consultation paper, see above under the subheading “Consultation Paper on Strengthening the Governance and Oversight of the International Audit-related Standard-setting Boards in the Public Interest”. Autorité des marchés financiers 40 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES INNOVATING Read this section to learn about recent innovative projects that are currently underway: artificial intelligence initiatives, a progress report on the fintech regulatory sandbox, and monitoring via social media.

Artificial intelligence initiatives 1 for disclosure monitoring

The AMF’s Fintech Lab is a think-tank, equipped with The Fintech Lab has been engaged in: exploratory tools, whose purpose is to provide the AMF ● with the knowledge it needs to fully carry out its regulatory ● the automated extraction of data contained in role in an increasingly digital environment. continuous disclosure documents filed by companies as PDF files, such as the financial information relating to The Fintech Lab works to: mineral projects that is contained in notes to financial statements. This data populates a database enabling the ● ● deepen and continuously update the AMF’s knowledge timely identification by the AMF of companies requiring of new technologies; an issue-oriented review. This historic data is also used ●● explore how the AMF can better use new technologies to track trends in a particular industry; and to improve its business processes; ●● the screening of relevant alerts we receive while ●● provide advice and insight with respect to the review monitoring companies’ continuous disclosure docu- of the regulatory framework and to regulatory sandbox ments, for example, to detect the use of promotional initiatives implemented by the CSA; and information in the mining sector. ●● anticipate the AMF’s needs regarding the latest expertise The Fintech Lab has also supported the ICO-related and computer systems. analysis work carried out by the regulatory sandbox. The Fintech Lab has enabled Corporate Finance to explore artificial intelligence initiatives for continuous disclosure monitoring.

FORMATHON 2.0 Corporate Finance also participated as a mandator in Formfintech’s Formathon 2.0. The goal of this fintech marathon is to find solutions to current financial challenges by bringing together multidisciplinary teams supported by people with expertise in various aspects of the financial ecosystem. The resulting innovative solutions, including artificial intelligence, will help the AMF achieve its objective of becoming a more efficient regulator through targeted interventions. Autorité des marchés financiers 41 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

2 Fintechs – The work of the regulatory sandbox

In February 2017, the CSA launched a regulatory sandbox, Since the beginning of 2018, the sandbox has also presided over by the AMF, to support fintechs that wish considered issues involving cryptocurrency trading to develop and offer innovative applications, products and platforms in order to gain greater insight into their services in Canada. Selected firms can register or obtain activities. exemptive relief from securities regulatory requirements more quickly and easily and can test their models In addition, the sandbox’s work contributed to numerous throughout the Canadian market on a time-limited basis. warnings being issued in respect of ICOs both by the CSA and by certain jurisdictions at the local level. For We wish to encourage innovation and foster efficient example, on December 18, 2017, the CSA published a financial markets, while adequately protecting investors. press release reminding investors of the inherent risks With cryptocurrencies and tokens becoming increasingly associated with products linked to cryptocurrencies, popular with consumers, balancing the new investment including futures contracts. On January 15, 2018, the AMF opportunities they represent and the need to protect published a warning for investors about the risks associated investors from high-risk or fraudulent activities is extremely with ICOs and reminded issuers and sponsors of their important. The AMF will therefore continue to monitor ICOs obligations under securities laws. As recently as March and other related activities. 31, 2018, the AMF published a notice entitled Let’s clarify cryptocurrencies. Lastly, in May 2018, the CSA launched Over the past year, the CSA and the AMF received a social media campaign to educate investors about the many applications from market participants seeking risks associated with cryptocurrencies and cryptocurrency to raise capital using blockchain technology, facilitate trading. cryptocurrency trades, or establish cryptocurrency investment funds. During the last fiscal year, the sandbox reviewed approximately twenty fintech files from all over Canada, including four presented by the AMF. During that same period, the AMF reviewed approximately 103 fintech applications. The AMF’s experts help fintechs and other firms to better understand the applicable regulatory environment. Autorité des marchés financiers 42 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

3 Monitoring via social media

We may include companies’ use of social media, such as Facebook, LinkedIn and Twitter, in the monitoring activities carried out to ensure compliance with regulatory requirements. Please see CSA Staff Notice 51-348. Autorité des marchés financiers 43 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES APPENDIX A LIST OF CERTAIN REGULATIONS (INCLUDING FORMS), POLICY STATEMENTS AND NOTICES PRESCRIBED FOR COMPANIES

This appendix contains the names of and hyperlinks to the regulations (including forms), policy statements and notices referred to in this Summary. All regulations and other texts are published under the heading Securities and Derivatives – Laws and Regulations on the AMF’s website.

REGULATION, POLICY STATEMENT REGULATION NAME OR NOTICE NUMBER

Regulation 25-101 respecting Designated Rating Organizations

Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations

Regulation 41-101 respecting General Prospectus Requirements

Form 41-101F1 Information required in a prospectus

CSA Staff Notice 41-307 Corporate finance prospectus guidance - Concerns regarding an issuer’s financial condition and the sufficiency of proceeds from a prospectus offering

Regulation 43-101 respecting Standards of Disclosure for Mineral Projects

Form 43-101F1 Technical report

Policy Statement respecting Standards of Disclosure for Mineral Projects to Regulation 43-101

Regulation 45-106 respecting Prospectus Exemptions

CSA Staff Notice 46-307 Cryptocurrency Offerings

CSA Staff Notice 46-308 Securities Law Implications for Offerings of Tokens

Regulation 51-102 respecting Continuous Disclosure Obligations

Form 51-102F1 Management’s discussion and analysis

Form 51-102F5 Information circular

Regulation 51-105 respecting Issuers Quoted in the U.S. Over-the-Counter Markets

Policy Statement respecting Issuers Quoted in the U.S. Over-the-Counter Markets to Regulation 51-105

CSA Staff Notice 51-348 Staff’s Review of Social Media Used by Reporting Issuers

CSA Staff Notice 51-352 (revised) Issuers with U.S. Marijuana-Related Activities

CSA Staff Notice 51-354 Report on Climate change-related Disclosure Project

CSA Staff Notice 51-355 Continuous Disclosure Review Program Activities for the fiscal years ended March 31, 2018 and March 31, 2017 Autorité des marchés financiers 44 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

Regulation 52-107 respecting Acceptable Accounting Principles and Auditing Standards

Regulation 52-109 respecting Certification of Disclosure in Issuers’ Annual and Interim Filings

Proposed National Non-GAAP and Other Financial Measures Disclosure Instrument 52-112

CSA Staff Notice 52-306 (revised) Non-GAAP Financial Measures

CSA Staff Notice 52-329 Distribution Disclosures and Non-GAAP Financial Measures in the Real Estate Industry

Regulation 55-104 respecting Insider Reporting Requirements and Exemptions

Regulation 58-101 respecting Disclosure of Corporate Governance Practices

Policy Statement 58-201 to Corporate Governance Guidelines

CSA Multilateral Staff Staff Review of Women on Boards and in Executive Officer Positions – Notice 58-309 Compliance with Regulation 58-101 respecting Disclosure of Corporate Governance Practices

Regulation 62-104 respecting Take-Over Bids and Issuer Bids

AMF Staff Notice relating to modern slavery disclosure requirements Autorité des marchés financiers 45 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES Autorité des marchés financiers 46 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES

Contact information We welcome comments and suggestions on how to improve this Summary of Oversight and Regulatory Activities. For more information, or to provide us with your comments, please contact any of the following people:

Lucie J. Roy Estelle Savoie-Dufresne Senior Director, Corporate Finance Director, Compliance – Issuers and Insiders Telephone: 514-395-0337, ext. 4361 Telephone: 514-395-0337, ext. 4371 Toll-free: 1-877-525-0337, ext. 4361 Toll-free: 1-877-525-0337, ext. 4371 E-mail: [email protected] E-mail: [email protected]

Martin Latulippe Patrick Théorêt Director, Continuous Disclosure Director, Corporate Finance Telephone: 514-395-0337, ext. 4331 Telephone: 514-395-0337, ext. 4381 Toll-free: 1-877-525-0337, ext. 4331 Toll-free: 1-877-525-0337, ext. 4381 E-mail: [email protected] E-mail: [email protected]